We’re about to be hit with the latest inflation data from the U.K., making the tight price action on GBP/USD one to watch for a potential breakout play.
Before moving on, ICYMI, today’s Daily U.S. Session Watchlist looked at the uptrend in USD/CAD ahead of U.S. retail sales data, so be sure to check that out to see if there is still a potential play!
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Fresh Market Headlines and Economic Data:
Fed officials say high inflation weighing on consumers and needs to be controlled
Bank of Canada deputy Lawrence Schembri reiterates that labor market still looks uncertain and that a rate hike may not come as soon as expected
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) homebuilder sentiment rose to 83; current sales conditions rose 3 points to 89.
IEA forecasts relief from high oil prices if U.S. global supply rebounds, and if demand wanes in Europe as covid-19 cases surge
U.K. Unemployment rate at 4.3% in October; annual growth in average total pay was 5.8%
GDP up by 2.2% and employment up by 0.9% in the euro area in the third quarter of 2021
Upcoming Potential Catalysts on the Economic Calendar
New Zealand PPI at 9:45 pm GMT
Japan Trade Balance, Machinery Orders at 11:50 pm GMT
Australia Leading Index at 12:00 am GMT (Nov. 17)
Australia Wage Price Index at 12:30 am GMT (Nov. 17)
U.K. Inflation Rates at 7:00 am GMT (Nov. 17)
Italy Trade Balance at 9:00 am GMT (Nov. 17)
Euro area Inflation Rate, Construction Output at 10:00 am GMT (Nov. 17)
If you’re not familiar with the forex market’s main trading sessions, check out our Forex Market Hours tool.
What to Watch: GBP/USD
We’ve got a juicy looking chart on GBP/USD with multiple potential technical setups available ahead of a top tier economic event from the U.K. The monthly U.K. inflation numbers will be out in the upcoming London trading session, and will likely get the British pound jumping as inflation has been the main economic focal point for traders this year.
Expectations are for the U.K. to keep on the global trend of higher prices, with the headline CPI expected to climb to 3.8% m/m in October vs. 3.1% previous. Any read above this expectation is likely to support speculation that the Bank of England will raise interest rates in December, and could draw in buyers on the data release.
If so, a break above both the consolidation pattern and the falling ‘highs’ marked above may draw in short-term technical and fundamental buyers, and with a daily ATR of around 90 pips, a move to 1.3600 is a possibility sometime this week. Now, this would be a counter trend move so it could be short-lived unless we saw a monster inflation beat. If not though, then swing traders may look at the bounce as a potential opportunity to play the medium term trend lower, likely looking for resistance around the Fibs and previous consolidation area around 1.3550 – 1.3600.
In the off chance that inflation data comes in below expectations or the previous read, that would be a big surprise that could quickly draw in Sterling bears to spark some volatility. A break below the consolidation range (roughly between 1.3400 – 1.3470) would likely draw in technical bears looking to play both the longer-term short bias and momentum move. In that scenario, GBP/USD could see 1.3300 before the end of the week, especially if broad USD strength continues to dominate.